No Coverage for Property that was not Insured’s “Primary Residence” as Described Under the Policy

Marie Laur | Property Insurance Coverage Law Blog | April 8, 2018

A Maryland court recently ruled there was no insurance coverage available to an insured for a loss to her property that was not her primary residence.

In the case Liberty Insurance Corp. v. Barnes,1 the district court ruled that the clear language of the policy barred recovery for the insured. In Liberty Ins. Corp. v. Barnes, the homeowner, Tracee D. Barnes (“Barnes”) purchased an insurance policy from Liberty Insurance Corporation (“Liberty”). On the insurance application, Barnes stated that the property was her primary residence and that no business was conducted on the property. During the policy period, the property was damaged by a fire. Barnes submitted a claim to Liberty.

While Liberty was investigating the claim, it discovered that the property was not Barnes’s primary residence, despite her assertion on the application that it was. Additionally, for years leading up to and at the time of the loss, Barnes leased the property to her business and used it as an assisted living facility.

The district court ruled for Liberty, holding that the policy unambiguously stated that the insured location was Barnes’s residence premises used for part or full-time personal occupancy. The court concluded that since Barnes had not resided at the property as stated under the policy, the property was not insured by the policy, and, therefore, Liberty was not liable for the loss.

Here, the clear language of the policy determined the outcome of the claim and case. Insureds should be certain to obtain the proper coverage for their property, or they could find themselves not covered for a loss.
1 Liberty Ins. Corp. v. Barnes, No. PX 17-2058 (D. Md. April 3, 2018).

Jury Instruction That Fails to Utilize Concurrent Cause for Property Loss is Erroneous

Tred R. Eyerly | Insurance Law Hawaii | March 19, 2018

The Florida District Court reversed erroneous jury instructions that adopted the efficient proximate cause doctrine in determining whether the insurer was responsible for the insureds’ collapsed roof. Jones v. Federated National Ins. Co., 2018 Fla. App. LEXIS 561 (Fla. Ct. App. Jan. 17, 2018).

The insureds filed a claim for their damaged roof, contending that the damage was caused by a hailstorm. Federal National Insurance Company denied the claim based upon exclusions for “wear and tear, marring, deterioration;” “faulty, inadequate or defective design;” “neglect;” “existing damage;” or “weather conditions.”

The insureds filed suit for breach of their all-risk policy. At trial, the insureds presented evidence that the hailstorm caused damage to the roof. Federated presented evidence that the hailstorm caused no meaningful damage, and that all the damage had already existed prior to the hailstorm as wear and tear. In rebuttal, the insureds presented evidence that the leaking solar panels could not have been the only cause of damage, pointing to the presence of hundreds of divots spread across the roof.

The insureds took issue with the jury instruction that required them to prove that the hailstorm was the “most substantial or responsible cause” of damage to the roof. The instruction read:

Did [the insureds] prove by the greater weight of the evidence that they sustained a direct physical loss to their roof as a result of the hailstorm . . . which was the most substantial or responsible cause of the damage to the roof?

The insureds submitted that the trial court would be wrong to apply the efficient proximate cause doctrine as advanced by Am. Home Assurance Co. v. Sebo, 141 So. 3d 195 (Fla. 2d DCA 2013). They argued that the policy was all-risk, covering all losses except those caused by specifically excluded events. The insureds submitted that the concurrent cause doctrine applied pursuant to Wallach v. Rosenberg, 527 So. 2d 1386 (Fla. 3d DCA 1988).

The trial court did not change the jury instruction and the jury determined that the insureds could not satisfy their burden of proof as set forth in the jury instruction.

On appeal, the court noted that the efficient proximate cause provided that where there was a concurrence of different perils, the efficient cause – the one that set the other in motion – is the cause to which the loss is attributable. The concurrent cause doctrine, on the other hand, provided that coverage may exist where an insured risk constituted a concurrent cause of the loss even when it was not the prime or efficient cause.

The insureds also argued that the trial court erred by requiring them to first prove that the hailstorm was the efficient cause of damage to the roof. The Court of Appeals agreed.

The all-risk policy stated, “We insure against risk of direct loss to property described in Coverages A and B only if that loss is a physical loss to property.” Coverage A specifically covered, “the dwelling on the residence premises shown in the Declarations, including structures attached to the dwelling.” After explaining that Federated would cover all direct physical losses to the dwelling, the policy then listed the specific exclusions to the coverage.

Because the policy was all-risk, the allocation of proof in the jury instruction was erroneous. The trial court placed the initial burden of proof on the insureds to demonstrate that the hailstorm was “the most substantial or responsible cause of damage to the roof.” Under an all-risk policy, once the insured established the loss within the terms of the policy, the burden shifted to the insurer to prove that the loss arose from a cause which was excepted. This was consistent with the notion that an all risk policy guarded against all risks except those explicitly excluded by the policy.

Because the jury instruction was erroneous, the case was reversed and remanded for a new trial.

Anti-Indemnity Legislation Is A Growing Trend in Western States

Andrew G. Witik | Litchfield Cavo LLP | March 22, 2018

The growing trend in the Western states of anti-indemnity legislation vis-à-vis construction activities has produced its most recent published and precedential decision in Oklahoma, JP Energy Marketing v. Commerce And Industry Insurance Co., 2018 OK CIV APP 14, 412 P.3d 121 (03/01/2018).  This coverage case arose from multiple underlying lawsuits over property damage caused by a fire which erupted during the construction of JP’s Great Salt Plains Pipeline in Payne County, Oklahoma.

Anti-Indemnity legislation is significant because often owners, developers and general contractors shift their own liability and risk to subcontractors.  Stated another way, “indemnification” and “additional insured” clauses routinely contained in construction subcontracts attempt to hold the subcontractor responsible for project site accidents and other losses that are not necessarily the fault or sole fault of the subcontractor.

In response to what appears to be a perceived unfairness toward subcontractors under this traditional risk shifting scheme, some state legislatures have enacted anti-indemnity laws that bear little resemblance to prior, and still the majority of anti-indemnity legislation throughout the states.  Some states such as Texas, Oregon and Oklahoma, with very limited exceptions, have barred altogether the making, naming or endorsing of another company or entity as an additional insured entitled to coverage for its own negligence in the context of construction activities and work.

The Oklahoma Court of Appeals decision, with issuance of the Mandate on March 1, 2018, was released for publication.  The JP Court in its affirmance of the trial court’s summary judgment finding in favor of the additional insured, and more specifically, that JP was entitled to defense and indemnity in the underlying suits under the policies of BITCO General Insurance Corporation, Alterra America Insurance Company and Navigators Insurance Company, addressed two issues of first impression:

  1. Whether the insurers’ particular policy language requires a direct contract between the pipeline owner, JP and the specific subcontractor to have the owner named an additional insured on the subcontractor’s liability policy?
  2. Whether Oklahoma’s anti-indemnity statute, 15 O.S. § 221, precludes coverage under the BITCO and Navigators policies as a matter of law?

This article focuses on the latter question – the Court of Appeals noting that “Oklahoma enacted the anti-indemnity statute in 2006, and [it was] the first appellate court to examine the statute.” The anti-indemnity law provides, in pertinent part, as follows:

  1. Except as provided in subsection C or D of this section, any provision in a construction agreement that requires an entity or that entity’s surety or insurer to indemnify, insure, defend or hold harmless another entity against liability for damage arising out of death or bodily injury to persons, or damage to property, which arises out of the negligence or fault of the indemnitee, its agents, representatives, subcontractors, or suppliers, is void and unenforceable as against public policy.
  2. The provisions of this section do not affect any provision in a construction agreement that requires an entity or that entity’s surety or insurer to indemnify another entity against liability for damage arising out of death or bodily injury to persons, or damage to property, but such indemnification shall not exceed any amounts that are greater than that represented by the degree or percentage of negligence or fault attributable to the indemnitor, its agents, representatives, subcontractors, or suppliers.
  3. This section shall not apply to construction bonds nor to contract clauses which require an entity to purchase a project-specific insurance policy, including owners’ and contractors’ protective liability insurance, project management protective liability insurance, or builder’s risk insurance.
  4. Any provision, covenant, clause or understanding in a construction agreement that conflicts with the provisions and intent of this section or attempts to circumvent this section by making the agreement subject to the laws of another state, or that requires any litigation, arbitration or other dispute resolution proceeding arising from the agreement to be conducted in another state, is void and unenforceable


Initially, the JP Court pointed out that the foregoing statute prohibits both “broad and intermediate form indemnity agreements in construction contracts,” that is barring indemnification for the indemnitee’s own negligence, sole or partial.  In other words, in Oklahoma the subcontractor indemnitor can only be responsible for indemnifying the indemnitee general contractor or owner developer to the extent of the indemnitor’s own negligence.  The Court of Appeals specifically reviewed the particular indemnification clauses contained in the subcontractors’ construction contracts  and found the language in compliance with § 221 (B) of the anti-indemnity statute cited above. Because the indemnification language in the subcontracts only agreed to “indemnify and defend JP for liability arising from” the acts and omissions of the subcontractors and “[did] not agree to indemnify and defend JP for liability arising from” its own negligence the indemnification agreements did not run afoul of the statute.

Similarly, the Court of Appeals reviewed the additional insured endorsements to the  subcontractors’ respective policies issued by BITCO and Navigators to determine whether the specific policy language obligated the insurers to indemnify or defend JP for its own negligence.  Referencing the foregoing policy language from the BITCO policy, the Court of Appeals held that neither insurance policy under review violated § 221 (B) or were in conflict with the anti-indemnity statute, explaining as follows:

The BITCO policy’s additional endorsement provides coverage to JP for damages “caused, at least in part, by [Global’s] negligence[.]” The insurance does not apply to “‘bodily injury’ or ‘property damage’ resulting from any act or omission of [JP] or any of their employees, other than the general supervision of work performed for [JP] by [Global].” The policy does not cover JP against its own negligence. We hold the agreements to name JP as an additional insured in the IPS-Global Subcontract and the BITCO insurance contract do not violate § 221(B) nor do they conflict with the provisions and intent of Oklahoma’s anti-indemnity statute.  See 15 O.S. § 221 (E)


The Court of Appeals decision in JP Energy Marketing illustrates yet again the criticality of knowing the scope of the specific anti-indemnity statute applicable to the construction project  being undertaken. All construction project participants as well as their counsel should be aware that if litigation ensues the prime contract, all subcontracts and applicable insurance policies will be reviewed and interpreted together by the courts in conjunction with the relevant state’s anti-indemnity statute.

Construction Defect Claim Must Be Defended Under Florida Law

Tred R. Eyerly | Insurance Law Hawaii | February 7, 2018

The Eleventh Circuit found that the insured caused property damage to areas beyond its own work, obligating the insurer to defend. Addison Ins. Co. v. 4000 Island Blvd. Condo. Ass’n, 2017 U.S. App. LEXIS 26870 (11th Cir. Dec. 28, 2017).

The condominium association contracted with Poma Construction Corp. to replace the building’s aging concrete balcony railings with new aluminum and glass railings. Poma subcontracted with Windsor Metal Specialties, Inc. to paint the new railings. Work was completed on February 24, 2012. Poma issued a 10-year warranty covering its installation of the railings. Windsor issued a 20-year limited warranty covering the paint job.

In October 2014, the association sued Poma and Windsor, alleging that the new railings were defective and would need to be removed and replaced. Claims for breach of contract, breach of implied warranty, and breach of express warranty were asserted. The amended complaint alleged that the defective railing system, including Windsor’s defective paint finishes on the railings, caused damage to other property such as the railing post pockets, the balcony concrete slabs, and finishes on the balcony concrete slabs.

Addison, Windsor’s insurer, sued for a declaratory judgment that it had no duty to defend. The policy provided that Windsor’s coverage did not apply to property damage to Windsor’s own work product or to that particular property that must be repaired because Windsor’s work “was incorrectly performed on it.”

Addison moved for summary judgment, arguing that the association had sued Windsor for breach of warranty, rather than for property damage. Windsor argued that a genuine issue of material fact existed as to whether the damage alleged in the association’s complaint constituted “property damage” to which no policy exclusion applied. An affidavit submitted with Windsor’s opposition stated there was railing failure and damage to the areas where the railings were installed.

The district court denied Addison’s motion for summary judgment. Addison appealed.

The Eleventh Circuit affirmed. Windsor’s work product was the paint finishes on the railings, and the railings were the particular part of the property on which Windsor’s work was allegedly performed incorrectly. The underlying complaint alleged that “the defective railing system, including the defective paint finish has caused and will continue to cause damage to other property . . . including but not limited to the railing post pockets, the balcony concrete slabs and finishes on the balcony concrete slabs.”

These allegations alleged facts that brought the action within the policy. Therefore, Addison had a duty to defend.

Contractors: Consult Your Insurance Broker Regarding Your CGL Policy

David Adelstein | Florida Construction Legal Updates | February 10, 2018

Contractors:  do yourself a favor and consult your insurance broker regarding your commercial general liability (CGL) policy.   Do this now, especially if you subcontract out work.

CGL policies contain a “your work” exclusion.  The CGL policy is written such that it excludes “‘property damage’ to ‘your work’ arising out of it or any part of it and included in the ‘products-completed operations hazard.’” This exclusion will be raised in the post-completion latent construction defect scenario. (There are other exclusions that will be raised to a defect discovered during construction.)  Certain policies will contain a subcontractor exception to this “your work” exclusion.  You WANT this exception- no doubt about it so that this exclusion does not apply to work performed by your subcontractors.  Without this subcontractor exception, truth be told, this “your work” exclusion is a total back-breaker to contractors.   It will give your insurer an immediate out for many latent defect property scenarios since excluded from coverage is property damage to your work including work performed by your subcontractors.

In a recent opinion, Mid-Continent Casualty Co. v. JWN Construction, Inc., 2018 WL 783102 (S.D.Fla. 2018), an owner discovered water intrusion and damage at his property.  He sued the general contractor and the general contractor’s insurer filed a separate action for declaratory relief claiming it had NO duty to defend or indemnify its insured—the general contractor—in the underlying suit.  The court agreed because the contractor did not have the subcontractor exception to the “your work” exclusion.

If work was performed by JWN [contractor] or on JWN’s behalf-here by a subcontractor-then the “your work” exclusion applies.  Historically, insurers could be liable under commercial general liabilities policies resembling the policy in the instant case for certain types of damages caused by subcontractors….Nonetheless, insurers do possess the right to define their coverage as excluding damages arising out of a subcontractor’s defective work by eliminating subcontractor’s exceptions from the policy. An insurer is only liable for a subcontractor’s defective work when the “your work” exclusion does not eliminate coverage for work performed by a subcontractor….In conclusion, the insurance policy in this case excluded coverage for work performed not only by JWN, but also by JWN’s subcontractors.

JWN Construction, Inc., supra, at *4.

This ruling meant that the general contractor’s CGL insurer had no duty to defend or indemnify its insured—again, the contractor—for the defects or resulting water damage.  A total killer illustrating the absolute importance of the subcontractor exception to the “your work” exclusion in your CGL policy.